Analyst: New iPhones coming, but growth won’t explode

The rumor mill has begun churning over when and what features may come in …

As rumors and circumstantial evidence mount in favor of Apple announcing some kind of new iPhone at WWDC 2009, analysts have begun picking their sides. Mike Abramsky of the Royal Bank of Canada (RBC) thinks that some sort of "iPhone 3G Pro" is indeed on its way this summer, but he doesn't see any iPhone-3G-like explosion of attention or growth like Apple enjoyed last year.

In a report seen by AppleInsider, Abramsky predicts what is becoming a fairly standard set of expected feature updates that are evolutionary, and not really revolutionary, for Apple's third iPhone. Things like a 3.2 megapixel camera, better battery life "for video playback" (never mind all the other instances where more juice could help), a faster HSUPA 3G chip (instead of the current HSDPA), an improved graphics processor, video recording, and larger 16GB/32GB capacities are all on Abramsky's wish list.

Even with all these welcome additions, Abramsky is not expecting last year's massive surge of growth to make an encore. He does not see the rumored drop in pricing to $99 for the base model (16GB, if things pan out) iPhone as coming true, either. After all, Apple is a hardware company. Instead, the iPhone updates will mainly serve to sustain the iPhone's current growth and to ensure that Apple does not fall too far behind the competition. The only exception is China, a potentially large market where Apple may finally be sealing the deal with Unicom, the nation's second-largest carrier.

Even if iPhone growth does not experience another puberty this summer with a new model, sales are still doing quite well. Piper Jaffray analyst Gene Munster expects Apple to sell 4.4 million iPhones in Q2 2009 (which ends this month), and Apple has sold 13 million iPhones (and another 17 million iPod touches) to date.

46 Reader Comments

So, the ferry tale according to Abramsky is that the iPhone 3G can only download, and the next model will only upload? HSUPA (high speed UPLINK packet access) is NOT a faster version of HSDPA (high speed DOWNLINK packet access)... HSDPA with 7,2 Mbit/s is still HSDPA... just, most carriers and chipsets did only support 3,6 MBit/s. HSUPA is a requirement for useful video conferencing though... the upload speeds of the current chipset would only provide a pretty desperate experience.

Apple can put into the phone whatever they want, there is little chance for any "surge" right now... a lot of people already hold out for the updated version, so there is pent-up demand, China will be added, that will do. It is much more important for Apple to distance the iPhone even further from the Storm, steal the attention from the Pre and keep it going. The revised software and SDK plus vastly improved browser speed will do the rest automagically. Certainly they will improve the camera a bit – it is the number one hardware complaint , and certainly memory only knows one way: up.

So, here's Abramsky: a lot of bunk and the rest is obvious.

I do see a 8GB model at 99 USD though – not a Nano, just a slightly stripped model. If Apple can offer something 50% cheaper than Storm or Pre and still make some money... they will do it.

The only thing that could cause an iPhone explosion at this point is nonexclusivity with AT&T. Since that's not happening for another year or two, we'll see them max out the AT&T market. Also, people with original iPhones will be up for a new contract, so there will be some renewals (those who did not upgrade to the 3G for the new shiny).

Originally posted by toby34a:The only thing that could cause an iPhone explosion at this point is nonexclusivity with AT&T. Since that's not happening for another year or two, we'll see them max out the AT&T market. Also, people with original iPhones will be up for a new contract, so there will be some renewals (those who did not upgrade to the 3G for the new shiny).

++

It could be less than a year or two. No one knows what the terms of the contract between AT&T and Apple is since they threw out the shared revenue contract. Apple could profit tremendously if they quit with the exclusivity garbage.

All they're going to do is replace the Infineon 608-based chipset with the 618-based chipset for HSPA (7.2/2.9), which will reduce power consumption. Probably up the memory 16/32GB. And maybe a difference case/styling (aluminum?).

The difference is the OS 3.0 software. Being able to talk using the dock connector and possibly through bluetooth, it would open up the doors needed.

Originally posted by marv08: HSUPA is a requirement for useful video conferencing though... the upload speeds of the current chipset would only provide a pretty desperate experience.

I seem to remember that one of the justifications they had for not implementing MMS in the current model was lack of speed, they didn't think the user experience was good enough. FW 3.0 is to support MMS so it follows that they are now supporting HSUPA. But that doesn't mean video conferencing which is oft rumored but unlikely.

If Apple can offer something 50% cheaper than Storm or Pre and still make some money... they will do it.

No they won't, they will continue to compete on "awesome" and other parts and keep their margins.

Apple loathes selling to the low end, and in virtually every market space it occupies, it's more expensive. That's fine, it works for Apple (I have a 3G iPhone), but don't say they compete on price or undercut the competition.

The only thing that could cause an iPhone explosion in the United States at this point is nonexclusivity with AT&T.

T,FTFY.

(And even then, the only other game in town is T-Mobile, who doesn't have quite the network infrastructure to support all of the iPhone's capabilities, but it would certainly attract new users nonetheless.)

Verizon is the only other interesting carrier for Apple to work with. Verizon doesn't offer any phone that allows all of the functionality of the iPhone without additional charges. Its doubtful Apple would allow Verizon to charge extra for the iPhone's native features.

One would have to give in for them to work together. So far there is not evidence either is willing.

quote:

Originally posted by toby34a:The only thing that could cause an iPhone explosion at this point is nonexclusivity with AT&T.

Originally posted by marv08:Well, they could "upgrade" the GPS by replacing it with support for Galileo (higher precision, velocity and elevation data)... Could cause the Pentagon to have quite a fit though :-)

I have my doubts. Galileo is supposed to be operational in 2013. I don't think Apple is that forward-looking ...

Originally posted by Teno:Verizon is the only other interesting carrier for Apple to work with...

One would have to give in for them to work together. So far there is not evidence either is willing.

Not to mention that whole GSM <> CDMA incompatibility problem! At this point, there would have to be a significantly compelling reason for Apple to engineer and support a CDMA model, particularly since the future eventually points to LTE which both AT&T and Verizon will support anyway. Knowing Apple's (well, Jobs') obsession with product matrix minimalism, I don't see that happening.

And yeah, Verizon would probably insist on polluting the home screen with their own service tie-ins, which may well be the reason they couldn't strike an agreement with Apple before the iPhone was even revealed to the public.

All they need is an upgrade which entices current iPhone owners to get a new contract when their current one expires. Doubling the memory capacity and upping the other specs will accomplish that. Also, you know, colors!

Making a CDMA iphone is trivial and I'm sure there's already a working prototype somewhere. The only reason there isn't a verizon iphone is because verizon's music and game services are in direct conflict with itunes and the app store, and neither side is willing to budge... yet.

Thinner (Its a bit of a clobber currently the iTouch form factor would be the optimum but a couple mm less would be enough) and with a camera with some rudimentary xenon flash so you can make a picture or two in the evening like some Sony phones (I have only used a phone camera when going out anyway) and it would be perfect. (perhaps some instant messaging ...)

Once they have achieved this level of functionality they could go lower in price with a phone of this functionality from then on. Nokia should perhaps get back to wood processing.

Originally posted by NuVector:I seem to remember that one of the justifications they had for not implementing MMS in the current model was lack of speed, they didn't think the user experience was good enough. FW 3.0 is to support MMS so it follows that they are now supporting HSUPA. But that doesn't mean video conferencing which is oft rumored but unlikely.

The new software will add MMS capabilities to the current 3G model, it will not add it to the original (EDGE only) model though. There is no reason why MMS would need a faster uplink – it is not a real time service, video conferencing and voice chat are.

This does of course not mean or prove that video conferencing is coming (just now)... HSUPA does only mean faster uploads, no matter for which application and is an enabling technology for it. Looking at the fact that most carriers do not even allow/support voice chat over 3G, I do not see video conferencing taking off just yet either. Network providers would love to sell that as a premium service at horrendous rates, so you have your 3G "flat rate", but have to pay extra for tethering, voice chat and video chat and whatever else they come up with... a "natural" consequence from Apple taking the music, ringtone and application business away from them I guess...

Originally posted by Happysin:No they won't, they will continue to compete on "awesome" and other parts and keep their margins.

Apple loathes selling to the low end, and in virtually every market space it occupies, it's more expensive. That's fine, it works for Apple (I have a 3G iPhone), but don't say they compete on price or undercut the competition.

Well, your memory is no serving you well here. When the iPhone 3G was released at USD 199 for the 8GB model, it WAS the cheapest smartphone in most markets (when it arrived in Europe, the N71 and Sony P99x models were selling for 400-500 EUR after subsidy). Apple did lower the price to put pressure on the competition, and it worked well for them. They are one of the biggest buyers of Flash memory and subsequently have a component price advantage over the competition – using it to make the business less lucrative for others is a strong tool. Since the 3G was released the average price level for smartphones went down dramatically, and it did negatively affect the bottom line of e.g. Nokia and Sony. No reason why they should not do it again. Heck, at the current 400 USD subsidy, they could give it away for free and still make more money than most others. Actually, several providers in Europe do give it away for free right now (I paid exactly one Euro for the 16GB model with my official 24 months contract, plus got the connection fee and 2 out of 24 months for free – bottom line I got the iPhone for free plus 272 USD in m pocket). Who is cheaper?

The iPhone is an ecosystem, not a handset. Therefore Apple won't do anything that will bugger up the apps ecosystem they've established - no different resolution screens, no slide-out keyboard, nothing "revolutionary".

But then again, the 3G version wasn't revolutionary, either. The 3G made it a bit faster - but not that much in practice. Arguably it was the GPS that was the biggest change.

The real difference that Apple has made to the mobile market (IMHO) is to overturn the usual practice of churn: manufacturers and networks have been working on the assumption that people will change handsets regularly for new "features" - and that the old handsets then become effectively worthless. When an iPhone gets replaced, it becomes an iPod Touch. So Apple have mitigated the idea of their mobile products becoming "out of date" - they don't: they just get repurposed...

You don't need even EDGE for MMS. Just standard GSM is ok. I've got it here on an old SE T610 from 2001-ish.

Why Apple can't do it on the original iPhone is almost certainly nothing to do with the capabilities of the original iPhone.

The only thing I think that's still peeing me off with the iPhone is lack of a VOIP stack built in which by necessity would need to maintain SIP registration in the background. Apple's push system wouldn't work. Nokia's E71 (and E66 and 6300i) have an excellent VOIP implementation and I'm leaning more toward an E71 next than an iPhone. The 3.0 announcement was disappointing.

Who says they can't do it. They do not want to. And this is the correct way to deal with the idiotic money grab that is MMS. You have your email account with attachments setup in 30 seconds after all. Which is much more powerful and only costs bandwidth. Once 95% of all phones have email access SMS needs to die as well. Although it may be still needed for communicating with the majority of basic phones.

Originally posted by Sulis:The iPhone is an ecosystem, not a handset. Therefore Apple won't do anything that will bugger up the apps ecosystem they've established - no different resolution screens, no slide-out keyboard, nothing "revolutionary".

But then again, the 3G version wasn't revolutionary, either. The 3G made it a bit faster - but not that much in practice. Arguably it was the GPS that was the biggest change.

The real difference that Apple has made to the mobile market (IMHO) is to overturn the usual practice of churn: manufacturers and networks have been working on the assumption that people will change handsets regularly for new "features" - and that the old handsets then become effectively worthless. When an iPhone gets replaced, it becomes an iPod Touch. So Apple have mitigated the idea of their mobile products becoming "out of date" - they don't: they just get repurposed...

You contradicted yourself, personally i reckon they ARE trying to churn thru feature creep, there was no reason they couldnt have started with the 3G version.

Originally posted by Sulis:The real difference that Apple has made to the mobile market (IMHO) is to overturn the usual practice of churn: manufacturers and networks have been working on the assumption that people will change handsets regularly for new "features" - and that the old handsets then become effectively worthless. When an iPhone gets replaced, it becomes an iPod Touch. So Apple have mitigated the idea of their mobile products becoming "out of date" - they don't: they just get repurposed...

I'm not quite sure what you're talking about. On all other networks (and with all other handsets on O2), if the handset is locked then the user can request that the network unlock the handset. There's usually a fee, but it's not extortionate (around £15). Then you can pop in any SIM card and do whatever you like with the phone.

But not with the iPhone, O2 won't unlock it. Having an iPhone revert to an iPod when leave your mobile provider is a step backwards, not forwards.

I realise that the situation is better in other countries - I think the Australian providers will let you unlock your iPhone after the end of your contract. But my point is that losing the 'phone' part of your phone is not an improvement at all.

Originally posted by JPan:"Why Apple can't do it on the original iPhone"

Who says they can't do it. They do not want to. And this is the correct way to deal with the idiotic money grab that is MMS. You have your email account with attachments setup in 30 seconds after all. Which is much more powerful and only costs bandwidth. Once 95% of all phones have email access SMS needs to die as well. Although it may be still needed for communicating with the majority of basic phones.

Please, everyone, quit spreading so much mis-information, or at the very least, learn about what you're ranting against. MMS is included for NO extra cost on any texting plan for any carrier in the US. If the iPhone has SMS, there's no real argument for not including MMS. Also, is e-mail push on most phones? No? MMS/SMS is.

"MMS is included for NO extra cost on any texting plan for any carrier in the US."

And it costs quite a bit of money in Europe so what? For example t-mobile Europe: packages incl. 40SMS, 5MMS, every extra SMS 19Cent every extra MMS 39Cent. Many other plans do not include MMS but have 39Cent MMS in general. And before I pay 40Cent for a MMS which is a crippled email I shoot myself. Amerika is not the world. (Besides the texting approach is rather different I mean 5$ for 400 SMS/MMS may sound cheap but on the other hand not getting at least some included in your base plans seems weird, who needs 400 SMS per month? )

"Also, is e-mail push on most phones?"

Not YET that's the point. But it is true there will be a market for SMS for quite a while. MMS on the other hand should die in a fire.

Just to clarify, I'm fairly sure I'm right in saying that over the pond, you don't pay the same as we (Europeans) do for SMS/MMS. I believe that you pay to receive (at least in part), whereas it's free to receive here, and we pay the full amount for sending. It's why there are no Twitter SMS alerts over here (Amen for that), as it would cost Twitter to send them out.

I could be wrong, in which case there is plenty of room below for me to get shouted down

Originally posted by marv08:Well, they could "upgrade" the GPS by replacing it with support for Galileo (higher precision, velocity and elevation data)... Could cause the Pentagon to have quite a fit though :-)

Yes, they *could* "upgrade" it to support GPS, Galileo and GLONASS, but I very much doubt they would. Galileo has been designed (and conceptualized) from the start as a money making venture. The EU and the companies involved have planned on making money off licensing the rights to access the specific waveforms involved. The negotiations with the Russians over access to the GLONASS waveforms would be "interesting" to say the least.

As Jobs has been quoted as saying adding Blu-Ray to Macs is a "bag of hurt" (and it would be nothing compared to these "upgraded GPS" negotiations) I very much doubt we'll see a three or even two system "GPS" capability in iPhones in the foreseeable future.

If there is any "upgrade" to the GPS capability in the iPhone it will probably come along the lines of a tweaked version of A-GPS to make it more responsive and possibly more accurate.

Bottom line, if the camera is improved with something OTHER THAN megapixels—improved low-light exposure or autofocus come to mind—then I'll upgrade. Other than that, I think the OS update would be plenty for the time being.

Although the new generation of the iPhone may not generate a whole new revenue stream for Apple, it may mean a good selection of second hand 3Gs hitting eBay and the likes, at reduced price. Now to find out how much it costs to do a carrier unlock.

Originally posted by JPan:And it costs quite a bit of money in Europe so what? For example t-mobile Europe: packages incl. 40SMS, 5MMS, every extra SMS 19Cent every extra MMS 39Cent. Many other plans do not include MMS but have 39Cent MMS in general.

Hi, Europe (Denmark) here. SMS barely costs anything. I pay 1.42 cents (0.08 DKK) per SMS and 35.7 cents (2.00 DKK) for MMS. People send hundreds if not thousands of SMS per month. I just checked the iPhone plan, and it includes 5000 SMS/month. If you pay 19 cents for an SMS in Europe, you're getting raped.

Personally, I think email is a horrible replacement for MMS. There are other phones in the world than the iPhone, and on many of them email is a pain to set up and work with. MMS "just works", and is functionally similar to SMS which everyone already knows.

Originally posted by marv08:Well, they could "upgrade" the GPS by replacing it with support for Galileo (higher precision, velocity and elevation data)... Could cause the Pentagon to have quite a fit though :-)

Yes, they *could* "upgrade" it to support GPS, Galileo and GLONASS, but I very much doubt they would. Galileo has been designed (and conceptualized) from the start as a money making venture. The EU and the companies involved have planned on making money off licensing the rights to access the specific waveforms involved. The negotiations with the Russians over access to the GLONASS waveforms would be "interesting" to say the least.

As Jobs has been quoted as saying adding Blu-Ray to Macs is a "bag of hurt" (and it would be nothing compared to these "upgraded GPS" negotiations) I very much doubt we'll see a three or even two system "GPS" capability in iPhones in the foreseeable future.

If there is any "upgrade" to the GPS capability in the iPhone it will probably come along the lines of a tweaked version of A-GPS to make it more responsive and possibly more accurate.

Galileo will not be operational until 2012 - no need for Apple to rush on this one. When it does start, Galileo will offer a free service like GPS, only with better accuracy (comparable with the upcoming upgraded GPS). The 'paid for' and 'government only' services are separate.